Insurance; Competitors Gain But Partners Lose

By JOSEPH B. TREASTER

Published: December 2, 2001

For insurers, Enron's demise is expected to mean billions of dollars in losses through investments in its bonds, guarantees on its trades and claims on policies that protect its executives from shareholder suits.

But insurers who compete with Enron to cover ski resorts, theme parks and farms against adverse weather are likely to benefit.

Enron was the leader in this business, but its customers are now expected to turn to the 20 or so competitors, which include insurers and other energy companies. ''This is going to leave a void that many insurers are going to be very interested in filling,'' said Robert P. Hartwig, the chief economist at the Insurance Information Institute, a trade group in New York.

But the many providers of weather insurance who shared coverage of some customers with Enron may suffer, as they are left to pay any claims on their own. Losses resulting from Enron's collapse could run to $300 million to $500 million, experts said.

Losses for life insurance companies as a result of Enron's expected default on its bonds are expected to come to about $1 billion, said Colin Devine, an analyst at Salomon Smith Barney. Alice Schroeder, an analyst at Morgan Stanley, estimated additional losses of as much as $2 billion for insurers who promised to make good on Enron's transactions involving natural gas and other commodities. She said potential legal fees and judgments or settlements of lawsuits by shareholders against Enron executives could cost insurers an additional $300 million. But the impact of investment losses on property and casualty companies, she said, is not clear.